Dell: Carl Icahn's Still Got It

On the back of this morning's encouraging June employment report, investors bid U.S. stocks up, with the S&P 500 , and the narrower, price-weighted Dow Jones Industrial Average , both gaining 1%.

Consistent with those gains, the CBOE Volatility Index (VIX) , Wall Street's "fear index," fell 8%, to close at 14.89, its lowest closing level since May 30. (The VIX is calculated from S&P 500 option prices and reflects investor expectations for stock market volatility over the coming 30 days.)

Dell: The heat is onI have continued covering Michael Dell and Silver Lake Partners' plan to take Dell private, but had come to the conclusion that the duo had this deal sewn up despite activist investor Carl Icahn's gesticulations. We're now in the home stretch, with a shareholder vote scheduled less than two weeks from now, and it appears that I may have underestimated the impact of Mr. Icahn's efforts.

In fact, the legendary investor has reduced Dell's board to "playing both sides." On the one hand, they're now trying to scare investors with the risk that the stock could decline if the Michael Dell-Silver Lake acquisition is voted down (i.e., you're being offered more than the stock is worth). According to the Wall Street Journal, the board produced today a presentation that painted an unfavorable picture of the company, including one slide that states point-blank "H-P's [Hewlett-Packard] recent performance has been superior to Dell."

As they talk the company down out of one side of their mouths, the board has gone back to Mr. Dell to ask him to raise his offer (i.e., your current offer undervalues the shares). According to the Financial Times, this follows a round of consultations with investors, which revealed a distinct lack of enthusiasm for the current $13.65 per share offer.

Finally, multiple outlets are reporting that Michael Dell has no intention of raising his offer, and neither does Silver Lake. (Mr. Dell personally financed the final price increase during earlier negotiations.) No wonder the shares closed at their lowest level since the acquisition was announced on Feb. 5.

Given my record commenting on this situation, I will no longer predict what the outcome will be. I will say, however, that now, this situation ought to be the preserve of merger arbitrageurs or long-term shareholders who see value in Dell. In general, I don't think individual investors should "trade" stocks; this is precisely the type of situation which could end up demonstrating how painful that could be.

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